Ukrainian Products in Foreign Markets: Opportunities for Substitution of Russian Goods in Strategic Sectors

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UKRAINIAN PRODUCTS IN FOREIGN MARKETS: OPPORTUNITIES FOR SUBSTITUTION OF RUSSIAN GOODS IN STRATEGIC SECTORS

Ivan Us,

PhD in Economics,

Chief Consultant of the Center for Foreign Policy Studies

of the National Institute for Strategic Studies

Introduction

Despite conducting a full-scale war, Ukraine continues to be an active participant in international trade. According to the results of 2024, compared to the previous year, the value volumes of Ukraine’s foreign trade in goods increased by 13%, while their physical volumes grew by 26%. Thus, the stabilization of foreign trade in goods continues, though the indicators have not reached the level of 2021, i.e., the level before the beginning of the Russian Federation’s full-scale armed aggression against Ukraine.

Overall, a significant foreign trade deficit in goods has formed ($29.1 billion), demonstrating problems in logistics, consequences of the destruction of production capacities by the Russian Federation, energy infrastructure, meeting domestic market needs through imports for the defense-energy (energy equipment and electric power) sectors, restoration and creation of new production capacities for goods and services in other sectors of the economy. At the same time, imports were also stimulated by the growth of household incomes.

Ensuring stable operation of seaports and the Ukrainian sea corridor, as well as improving freight transportation by rail and road transport, contributed to the diversification of Ukraine’s commodity exports and an increase in their volumes. In addition, they allowed Ukraine to maintain its share in global exports of certain goods, and for some of them to remain in leading positions.

The main factors that caused the non-receipt of foreign exchange earnings from exports were the decline in prices on world markets for products that form the basis of Ukrainian exports (mainly grain and iron ore raw materials), as well as the non-return of foreign exchange earnings. In addition, during wartime, exporters were negatively affected by rising production costs and declining global demand for certain goods, particularly metal products.

However, exports, in addition to the economic function of bringing foreign currency to the country, perform another important function, namely allowing the displacement of Russian products from certain markets, thereby reducing these countries’ dependence on the Russian Federation. Considering that this dependence did not allow sanctions against the Russian Federation to be fully applied, this is an important task for Ukraine’s economy in achieving the strategic goal of victory in the confrontation with Russia.

Ukraine’s Foreign Trade in Goods in 2024

One of the many important components of combating Russia’s aggression at the international level is promoting the minimization of various countries’ dependence on receiving goods from this country. Indeed, analysis of the situation regarding the implementation of sanctions against the Russian Federation showed that the more countries depend on goods from Russia, the less their desire to impose sanctions against it.

Ukraine does not have the full capacity to substitute Russian goods in foreign markets with its own products in strategic sectors. This primarily concerns raw energy commodities. However, in the agricultural sphere, Ukraine has quite significant potential, as demonstrated by the results in foreign trade.

Thus, in 2024, the foreign trade turnover of goods amounted to $112.3 billion, demonstrating growth of 13%, changing the trend of the previous two years, which saw a decrease in foreign trade turnover (by 4% in 2023 and by 27% in 2022). At the same time, physical volumes of foreign trade showed relatively higher growth rates – by 26%, outpacing the projected global growth by almost ten times. According to data from the World Trade Organization, the growth of physical volumes of world trade for 2024 was 2.9%.

Despite better growth dynamics in value volumes of goods exports (16%) than their imports (11%), by the end of 2024, a record negative trade balance in goods of $29.1 billion was formed since Ukraine’s independence was restored, which exceeded the negative trade balance indicator for 2023 by $1.6 billion.

Overall, value volumes of goods exports, compared to 2023, increased in almost all major commodity groups of corresponding economic sectors, except for fuel and energy goods (decreased by 49%), as well as wood and pulp-paper products (decreased by 1%).

Much more noticeable were the growth rates of physical volumes of goods exports (by 31%), which occurred in most industries, except for fuel and energy goods, chemical industry products, rubber, as well as wood and pulp-paper products.

It should be noted separately that there were significant leading growth rates of physical over value volumes of exports of food and agricultural products (their share is 60% of Ukraine’s physical export volumes) and mineral products (share – 30%) compared to value export volumes in these commodity groups.

In particular, if value volumes of food and agricultural product exports increased by 13%, their physical volumes grew by 16%. An even greater difference was observed in mineral product exports: while their value volumes grew by 61%, physical export volumes of these goods increased by 91%.

The basis for such differences in the dynamics of value and physical export volumes primarily lies in world prices for Ukraine’s leading export positions. Thus, compared to 2023, world prices for corn decreased from $253 to $191 per metric ton (or by 24.6%), for soft wheat from $258 to $229 per metric ton (or by 10.4%), and for durum wheat from $340 to $269 per metric ton (or by 21.1%). World prices for iron ore also decreased from $121 to $109 per dry metric ton unit (or by 9.3%). Under these circumstances, the growth in world prices for sunflower oil from $1,007 to $1,060 per metric ton (or by 5.3%) could not significantly change the overall picture.

It should be noted that the leading five positions of Ukraine’s commodity exports in 2024 were sunflower oil (12.3% of total commodity exports), corn (12.2%), wheat (9%), ferrous metals (7.4%), and iron ore (6.7%).

In the commodity structure of exports, food products and agricultural products continue to play a leading role, although their share in monetary terms decreased slightly (from 60.8% in 2023 to 59.2% in 2024). At the same time, compared to the first half of 2024, the share of these goods in the export structure decreased by 4 percentage points, indicating gradual diversification of Ukraine’s commodity exports.

Compared to 2023, the share of mineral products in the commodity export structure increased from 5.5% to 7.6%. This was facilitated by the launch of the Black Sea corridor, which allowed expanding the nomenclature of goods exported from Ukraine compared to the results of the Black Sea Grain Initiative. Regarding other commodity groups, the share of metals and products made from them was 10.7%, while the share of machinery, equipment, and transport expanded to 8.3%, including due to a 2.9-fold increase in cable product exports to $1.3 billion.

Attention should also be paid separately to the situation in trade in individual commodity positions of export-import operations and to determine trends in them.

Titanium ores and concentrates. In 2024, Ukraine exported titanium ores and concentrates worth $11.7 million. The vast majority of these goods went to Turkey (62.8% of total exports of this commodity position) worth $7.3 million. There were also supplies of these ores to Egypt (7.4%), Poland (6.8%), and other countries, which accounted for 22.9% of total exports of this commodity position. At the same time, Ukraine imported titanium ores and concentrates worth almost $0.5 million, mainly from China (87.8%).

It should be noted that such data regarding titanium ore and concentrate export volumes are significantly smaller than volumes in previous periods, as well as data from the International Trade Centre. According to this data, Ukraine’s exports of titanium ores and concentrates in 2024 amounted to $82.5 million. Considering that global exports of titanium ores and concentrates in 2024 were $2.5 billion, Ukraine’s share was 3.3%. This is significantly less than the share before the full-scale war, when in 2020 it was 7.8%, and in 2021 – 7.3%.

Uranium or thorium ores and concentrates. According to data from the State Customs Service of Ukraine, in 2024 Ukraine neither exported nor imported uranium or thorium ores and concentrates. Ukraine’s main efforts are focused on meeting domestic needs for nuclear fuel and developing its own uranium industry.

Global exports of uranium or thorium ores and concentrates in 2024 amounted to $1.3 billion. At the same time, 86.9% of it was provided by one country – Namibia. Importers of goods classified in this group were only three countries in the world – the United States (72.4% of global imports), China (21%), and India (6.6%).

Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes. Ukraine is a traditional importer of mineral fuels. However, in 2024, value volumes of mineral fuel imports decreased by 14% while physical import volumes increased by 5%. This indicates a predominant decline in prices for goods classified in this group. However, each of these goods has its own dynamics.
Coal, anthracite, briquettes, ovoids and similar solid fuels manufactured from coal. In 2024, Ukraine imported coal worth $402 million, mainly from the United States (24.6% of total imports of this product), Australia (24.3%), and the Czech Republic (17.3%). At the same time, Ukraine exported this product worth $36.4 million, mainly to Sweden (40.6% of total exports of this product).

Front-line events affected the situation with coal purchases in 2025. Including, due to the inability to use the Pokrovsk coal mine, Ukraine stopped coal exports and significantly increased its import volumes. In just the first half of 2025, Ukraine imported coal worth $468.7 million, more than for the entire year 2024.

Petroleum gases and other gaseous hydrocarbons; in gaseous state. For many years, Ukraine imported significant volumes of natural gas. In 2011 and 2012, Ukraine imported natural gas worth $14.3 billion. In 2011, Ukraine was the ninth natural gas importer in the world, buying more natural gas than China ($13.4 billion) and India ($11 billion).

In 2024, Ukraine imported natural gas worth $0.7 billion. The main natural gas suppliers were Poland (18.8% of Ukraine’s total natural gas imports), Algeria (15.1%), and Lithuania (13.8%). At the same time, Ukraine almost did not export natural gas. In 2025, natural gas imports increased significantly. In the first half of the year, Ukraine imported natural gas worth $1.1 billion. The main suppliers were the Czech Republic (31%), Hungary (20.5%), and Poland (9.9%).

Electricity. Almost immediately after the start of the full-scale war, Ukraine joined the continental European energy system ENTSO-E on March 16, 2022. In Ukrainian society, this step was called “energy visa-free regime”. At that time, this step was supposed to contribute to increasing electricity exports from Ukraine to the EU. In September 2022, Ukraine was able to export electricity worth $150 million. However, in October 2022, attacks on Ukraine’s electricity generation began, which led to a decrease in electricity export volumes and the need to import them.

In 2024, Ukraine imported electricity worth $0.7 billion (same as natural gas). At the same time, exports amounted to $81 million. Regarding 2025, in the first half of the year, electricity imports amounted to $279 million, while exports show obvious volume growth – $75 million, almost repeating the value volumes of the entire 2024.

Products of chemical and related industries. Ukraine is traditionally a significant net importer of chemical and related industry products. In 2024, Ukraine imported goods from this group worth $11.7 billion, while their exports amounted to $1.2 billion. At the same time, compared to 2023, there was growth in both exports (by 5%) and imports (by 6%).

Ukraine imports a significant range of chemical and related industry products. Among the main positions, plastics should be highlighted (in 2024, Ukraine imported these goods worth almost $2.9 billion), pharmaceutical products (almost $2.4 billion), fertilizers ($1.2 billion), rubber and rubber products ($1 billion). In terms of chemical and related industry product imports in 2024, Ukraine ranked 50th in the world with a 0.3% share.

Regarding exports of chemical and related industry products, Ukraine mainly exported pharmaceutical products (worth $0.3 billion). Among global exporters, Ukraine ranked 83rd.

In the geographical structure of foreign trade in goods, the EU continues to hold first place with shares in Ukraine’s total export volumes of 59.5%, imports – 50.4%, and trade turnover – 53.8%.

It should be noted that despite having the most favorable trade regime (free trade zone and autonomous trade measures), the EU’s share in the geographical export structure decreased by more than 5 percentage points compared to 2023 (from 64.6%). This dynamic occurred despite the growth in export value volumes for 2024 by 6% or $1.5 billion, which changed the situation that existed in the first half of 2024, when there was a decline in Ukrainian exports to the EU by approximately 9%, or $1.1 billion. The leading commodity groups in Ukraine’s exports to the EU were industrial goods (increase of 1%) and food and beverages (increase of 6%).

The second largest trading partner of Ukraine after the EU in 2024 was China, with trade turnover of $16.8 billion (14.9% of total trade turnover). Traditionally, imports of goods from China ($14.4 billion) prevailed over Ukrainian exports to it ($2.4 billion), forming a negative trade balance of $12 billion. Compared to 2023, goods imports grew by 37.6%, while exports decreased by 0.5%. At the same time, physical export volumes to China increased by more than two times, which is related to changes in the commodity structure of exports from Ukraine to China.

The leading five positions of Ukrainian exports to China (at the commodity level) are iron ore raw materials (iron ores and concentrates) ($1.02 billion, representing 42.7% of total goods exports to China); corn ($552 million or 23.1%); meal and other solid residues from the extraction of vegetable fats and oils ($324 million or 13.6%); sunflower oil ($105 million or 4.5%).

The increase by $935 million (or almost 12 times) in iron ore raw material exports to China partially compensated for the decrease in food and agricultural product exports by $915 million or 41%.

Prospects for Expanding Ukraine’s Presence in EU Markets by Individual Goods

Despite the ongoing full-scale war, Ukraine is implementing projects initiated with European partners that will contribute to expanding Ukraine’s presence in European country markets.

On December 13, 2023, former Prime Minister of Ukraine Denys Shmyhal announced that thanks to the decision of the European Network of Transmission System Operators for Electricity (ENTSO-E), Ukraine has the opportunity to import up to 1.7 GW of electricity. Later, the then head of Ukrenergo, Volodymyr Kudrytskyi, announced that the company became a full member of the European Network of Transmission System Operators for Electricity Association ENTSO-E. Thus, Ukraine became the 40th participant in the “energy European Union”.

On July 21, 2025, a round table “Regulation of the Hydrogen Market in Ukraine: Presentation of the Draft Law and Next Steps” was held in Kyiv, organized by the United Nations Development Programme (UNDP) in Ukraine. The event became an important platform for professional discussion between representatives of legislative and executive authorities, international experts, business representatives, scientists, and public organizations regarding the development of hydrogen energy in Ukraine and its regulatory support.

The presented framework draft law became the first systematic document in Ukraine that lays the legal and institutional foundation for the development of production, transportation, and use of renewable and low-carbon hydrogen. The document was created within the framework of the UNDP Green Energy Recovery Programme, which promotes harmonization of Ukrainian legislation with EU standards.

Also, during the event, prospects for hydrogen transportation to the EU, development of hydrogen valleys, certification issues, project financing, the role of education and personnel training were discussed. Following the event, a consultation process was initiated involving experts, government bodies, associations, and business representatives. The creation of a working group is planned to finalize the draft law, with its subsequent submission to the Verkhovna Rada of Ukraine for consideration.

This round table became an important stage in Ukraine’s advancement toward the full launch of a clean hydrogen market, which corresponds to the goals of the European Green Deal, ensures energy security, and strengthens Ukraine’s position as a future hydrogen exporter to the EU.

The prospects for transporting natural gas, oil, and petroleum products from Ukraine to EU member states are complex and depend on many factors, including political stability, infrastructure capabilities, and economic conditions. Overall, Ukraine has potential for increasing energy resource exports to Europe, but this requires significant investment and cooperation. An important factor is also the development of domestic extraction, infrastructure modernization and diversification of energy resource supply sources, as well as political stability and security are key factors for attracting investment and increasing energy resource supplies to the EU.

Development of the Skifske and Delfin oil fields could be an important step for Ukraine, but requires careful planning, implementation of modern technologies, and strict environmental control. It is necessary to consider possible risks and challenges, as well as ensure transparency and effective management of the development process to maximize positive consequences and minimize negative impacts. This requires cooperation with countries that have practical experience in such activities, primarily with Turkey and Azerbaijan. Considering Turkey’s aspirations and capabilities to become a leading hub for energy resource supplies to Europe, replacing the Russian Federation, cooperation with it will facilitate Ukraine’s inclusion in providing European countries with energy carriers.

The prospects for mineral fertilizer exports from Ukraine appear ambiguous but generally positive, especially considering the restoration of seaport operations and improvement of the security situation. The main factors that will affect exports are the situation at the front, production restoration, and logistics capabilities.

Regarding the prospects for caustic soda exports from Ukraine, they depend on several factors, including the current geopolitical situation, competitiveness of Ukrainian producers, and demand in the global market. Considering that Ukraine has a developed chemical industry, increased caustic soda exports are potentially possible, especially if trade barriers are removed and sales markets are expanded. Overall, the prospects for caustic soda exports from Ukraine are positive but require overcoming current obstacles and investment in industry development.

Increasing Ukraine’s Exports and Opportunities for Substitution of Russian Goods in Strategic Sectors

Ukraine has sufficiently high potential for expanding its presence in foreign markets. Products with the greatest export potential from Ukraine to the world are ferrous metals, vegetable oils and fats, as well as cereals (except rice). According to assessments by experts from the International Trade Centre, Ukraine’s unrealized commodity export potential amounts to $30 billion. Ferrous metals demonstrate the largest absolute difference between potential and baseline exports in value terms, leaving room for additional exports worth $4.8 billion, representing 16% of Ukraine’s unrealized export potential. Ukraine can also increase its cereal exports by $3.3 billion, mineral resources by $3.3 billion, and vegetable oils and fats by $3.2 billion.

The increase in exports of these commodity positions can occur, among other things, through substitution of Russian goods in strategic sectors. The main commodities of Russian exports are hydrocarbons. At this stage, Ukraine cannot substitute the Russian Federation in these areas. However, it should be mentioned that according to assessments conducted by relevant state agencies, prospective reserves of conventional and unconventional natural gas in the Oleska and Yuzivska gas fields are estimated at 7 trillion cubic meters. Therefore, such possibilities exist in the future. Primarily in EU countries, which accounted for 60% of Russian oil exports until 2022.

However, there are already opportunities to substitute Russian goods in the agricultural sector and metallurgy, where Ukraine and the Russian Federation are direct competitors in global markets. This is precisely why Russia, since the beginning of the full-scale war, among other things, implemented blocking of free navigation in the Black Sea. This allowed Russia to displace Ukrainian grain and metals in global markets, substituting them with its analogous products (including analogous products stolen from Ukraine). Ukraine also competes with the Russian Federation in the chemical industry and wood processing sector.

Thus, displacing Russian goods from global markets creates new opportunities for Ukraine and allows combining increased export revenues with reducing other countries’ dependence on goods from Russia. Therefore, as early as February 2023, the Committee of the Verkhovna Rada of Ukraine on Economic Development held hearings on the topic: “Substitution of imports from the Russian Federation and the Republic of Belarus with Ukrainian goods in Ukraine, the EU and the world”. At these hearings, it was noted that Ukraine can substitute Russian Federation and Republic of Belarus manufacturing industry products in Western markets worth $25.5 billion. Additionally, it was proposed that the Cabinet of Ministers of Ukraine develop a plan for substituting imports from the Russian Federation and Belarus with Ukrainian goods in Ukraine, the EU and other Western markets.

In the agricultural sphere, Ukrainian producers are capable of replacing Russian cereals, oil, and chocolate. Western countries almost do not impose sanctions against Russian food products (due to fears that such a step would negatively affect global food security), so in this case it is not so much about free niches as about increasing exports from Ukraine.

However, in matters of substituting Russian agricultural products, markets in Africa and Asia have more strategic significance. After all, food imports in countries of these regions have relatively greater importance than in Europe, and therefore agricultural product importers can have more influence on policy in these countries.

Thus, in 2024, Turkey imported cereals worth $2.7 billion, of which 53.6% came from the Russian Federation and 29% from Ukraine. Considering Turkey’s significance in the Black Sea region, a priority task for Ukraine is displacing the Russian Federation from Turkey’s cereal market.

Russia also has notable positions in the cereal markets of Middle Eastern countries. Thus, in 2024, the Russian Federation accounted for 59% of wheat imports by the leading OPEC country – Saudi Arabia, while Ukraine’s share was 0.7%. Although in 2021, Ukraine’s share was 21.6%, and Russia’s share was 19.8%. That is, in Saudi Arabia’s wheat market, the Russian Federation managed to displace Ukraine, which requires measures to restore its positions and then displace Russia.

Regarding Africa, the main country where Ukraine competes with the Russian Federation is Egypt. According to available data, in 2023, Egypt imported cereals worth $6.4 billion. Of these, Russia’s share was 40%, while Ukraine’s share was 22.7%.

In ferrous metallurgy, Ukrainian carbon steel semi-finished products, pig iron, hot-rolled flat products, bars and rods of carbon steel can displace Russian analogues. The EU applies quotas to metallurgical imports from third countries. Since sanctions against Russian and Belarusian iron and steel came into effect in the second half of 2022, their quotas were divided among other countries, allowing increased exports of these products to the EU.

According to a study by Ukrainian Center for Market Economy Development, Ukraine can substitute up to three-quarters of Russian metallurgical product supplies to Western countries, representing approximately $9.4 billion.

As a result of sanctions imposed on Belarus and Russia regarding wood and wood products, Ukrainian factories can increase exports of furniture, fiberboard, particleboard, and plywood.

Although sanctions and the West’s unwillingness to trade with the Russian Federation and Belarus increase the chances of Ukrainian producers, the mere existence of free niches is insufficient to fill them with domestic goods.

First, the war has destroyed many production facilities. Metallurgy has lost a number of the largest enterprises in the east of the country. Due to fighting, mining, or temporary occupation, it is impossible to use a significant number of fields, which will mean a drop in harvest and food exports.

Second, Ukraine continues to defend against the Russian army, so rapid economic growth should not be expected. After all, permanent power outages as a result of Russia’s shelling do not allow domestic industry to operate at full capacity.

Logistics problems are also being created. Thus, as a result of partial blocking of seaports, metallurgical enterprises cannot ship the volume of products they could produce. Overland logistics is too expensive, so such trade does not bring sufficient profits for investment in production itself. Without maritime logistics, Ukraine loses its positions in major export markets.

In addition, supply chains have been destroyed. Ukraine bought a lot of raw materials for metallurgical production abroad, and with the beginning of the full-scale war, traditional supply routes were severed. For example, a lot of coking coal came from the Russian Federation and Kazakhstan.

All these factors affect Ukraine’s ability to produce more products for export. Correcting them within a few years is extremely difficult, especially in the chemical industry, which requires investment to increase lost production volumes.

There are other factors that do not favor Ukrainian producers. This primarily concerns the fact that refusing Russian products does not mean buying Ukrainian ones. That is, new markets will have to be fought for not only through explaining through diplomatic channels that buying goods from the Russian Federation makes those countries that do this sponsors of the war against Ukraine, but also through readiness to replace the Russian Federation.

Further opening of foreign markets is critically important for Ukrainian producers. This involves concluding free trade zone agreements, as well as active trade diplomacy and export insurance opportunities.

Partial Inventory of Ukraine’s Industrial Capacities

The full-scale war undoubtedly negatively affects Ukraine’s production potential and capacities. It is difficult to fully assess losses and remaining capacities at this time since hostilities continue. However, some aspects can be analyzed. Thus, in the energy sector, the following losses should be highlighted: occupation of the Zaporizhzhia Nuclear Power Plant (NPP), loss of control over part of gas fields, damage to thermal power plants (TPP) and hydropower plants (HPP) infrastructure as a result of shelling. At the same time, fairly constant attacks on electricity generation facilities under Ukraine’s control occur, leading to constant limitations on their activities. In addition, there is a need to restore damaged infrastructure to ensure energy security.

At the same time, certain potential of Ukraine’s energy sector is preserved, which consists in implementing renewable energy sources, particularly solar and wind energy. Also, despite military actions, development of distributed generation and modernization of existing facilities continues.

In the industrial sphere, Ukraine has also suffered significant losses: significant destruction of enterprises, particularly in the metallurgical, energy, and agricultural sectors, as well as damage to infrastructure and logistics capacities, especially in eastern and southern Ukraine, loss of access to seaports, which complicates product exports. In addition, a number of enterprises important for domestic exports found themselves in temporarily occupied territories, primarily Ukraine’s leading metallurgical enterprises – the Ilyich Iron and Steel Works of Mariupol and Azovstal.

Despite the mentioned losses, potential in the industrial sphere is preserved in Ukraine through reorientation to new sales markets, development of production in safer regions, implementation of modern technologies, and focus on high-tech industries.

Regarding agriculture, the main problems are loss of part of agricultural land, complications in grain exports, and field mining. The agricultural sector has lost agricultural machinery, crops, grain storage facilities, perennial plantations, and livestock. This imposes limitations in the form of the need to demine territories, restore irrigation systems, and find alternative export routes.

The basis of agricultural sector potential lies in developing modern land cultivation technologies, increasing production of high value-added products, and using new sales markets.

It can be noted that the main losses for Ukraine’s economy lie in the destruction of infrastructure facilities, loss of scientific potential and human resources. Such problems necessitate attracting investment, solving the personnel deficit problem, and ensuring security. The basis of potential lies in reorientation to innovative technologies, development of the digital economy, and restoration and modernization of transport infrastructure.

Overall, Ukraine has significant potential in many strategic sectors, but the war has significantly affected its capabilities. It is necessary to restore destroyed infrastructure, reorient to new markets, attract investment, and develop innovations. Further assessment of potential and capacities will be possible after the end of hostilities and de-occupation of territories.

According to data from the Kyiv School of Economics, direct infrastructure damage in Ukraine from the war reached almost $170 billion as of February 2025. Compared to the beginning of 2024, this figure increased by $12.6 billion, which is a consequence of further destruction due to missile attacks and hostilities.

Industry, construction, and the services sector suffered losses of $14.4 billion. Enterprises lost equipment, production facilities, and logistics capacities. As of November 2024, almost five hundred large and medium private as well as state enterprises were destroyed or seriously damaged.

The agro-industrial complex also suffered significant destruction – losses amount to $10.3 billion. More than 130,000 units of agricultural machinery were lost, 4 million tons of grain storage facilities were destroyed or damaged, and 16,000 hectares of perennial crops. The forest fund also suffered significant losses – 298,000 hectares of forests were damaged due to fighting and fires, with losses estimated at $4.5 billion.

Ukraine’s energy sector lost $14.6 billion. As a result of attacks, the Kakhovka and Dnipro HPPs, Trypilska and Zmiivska TPPs were completely destroyed, and a significant number of other generating capacities, as well as high-voltage substations and oil and gas infrastructure facilities were damaged or destroyed.

Combining War Economy and Prospects for Expanding Presence in Foreign Markets

The period since 2022 is, among other things, associated with the state combining two vectors: conducting a full-scale war, a component of which is converting the economy to a war footing, and Ukraine’s European integration, which will be facilitated by improved trade turnover with EU countries. It should be noted that entering European markets and converting the economy into a war footing are two interrelated but not always compatible processes. On one hand, integration into the European economic space can help ensure stability and development of key industries, particularly mechanical engineering, IT, and metallurgy, by attracting investment, new technologies, and expanding export opportunities. On the other hand, a war footing involves reorienting the economy to meet defense needs, which may limit export opportunities and require priority financing and resources for the military-industrial complex.

Positive aspects of integration into the European space in the context of a war economy:

Investment and financial support. European countries and institutions can provide financial assistance and investment to support the Ukrainian economy and key industries affected by the war. This may include targeted financing for infrastructure restoration and modernization, as well as supporting export potential.
Technology transfer and experience sharing. European partners can share technologies and experience in defense production, which can contribute to improving the efficiency of Ukrainian defense industry.
Expanding export opportunities. Integration into the European market can provide access to new sales markets for Ukrainian goods, including mechanical engineering, IT, and metallurgy products, which is especially important under conditions of limited domestic demand.
Economic stabilization. Attracting European investment and export support will contribute to stabilizing the economic situation in Ukraine and reducing dependence on external assistance.

At the same time, negative aspects and challenges are present:

Priority of defense needs. Transition to a war footing may lead to redirecting resources from other sectors of the economy, particularly civilian ones, to defense needs. This may limit opportunities for developing export potential and investment in other sectors.
Export limitations. Some key industries, such as metallurgy, may experience difficulties exporting their products due to logistics limitations and supply interruptions.
Need for production reorientation. Transition to a war footing may require retooling production capacities and changing production processes, which can be a complex and expensive task.
Competition with European producers. In some industries, particularly mechanical engineering, competition with European producers may arise, which will complicate entry into European markets.

Thus, there is a need for balancing needs, which may include the following components:

Strategic planning. It is necessary to develop a strategy that takes into account both defense needs and opportunities for economic development and integration into the European space.
Economic diversification. It is important to diversify the economy and develop various industries to avoid excessive dependence on one sector.
Support for innovation and technology. It is necessary to invest in innovations and technologies that can be useful for both the defense industry and civilian sectors of the economy.
Cooperation with European partners. It is important to develop cooperation with European partners in defense production, technology, and trade. Thus, during 2024-2025, the creation of joint ventures with European weapons manufacturers was announced both on Ukrainian territory and on European territory.

Thus, entering European markets and transitioning to a war footing are not mutually exclusive processes. In the longer term, Ukraine, after joining the EU, will be able to play a notable role in EU weapons production.

Conclusions and Recommendations

Achieving the goal of substituting Russian goods will largely depend on maintaining and strengthening sanctions pressure on the Russian Federation’s economy. Therefore, at the diplomatic level, Ukraine must constantly raise this issue.

Overall, it should be noted that Ukraine has managed to maintain its presence in foreign markets. This is a prerequisite for fulfilling another, more complex task, namely displacing Russian goods from markets of those countries where dependence on goods supplies from the Russian Federation has formed.

Improving positions and realizing opportunities for substituting Russian goods in strategic sectors requires the following steps from state bodies:

on a permanent basis, conduct negotiations with the UN and Ukraine’s partner countries regarding their assistance in ensuring the security of transporting export goods from Ukraine, primarily those that are critical for other countries;
ensure reconstruction, insofar as possible, of affected production facilities whose products are directed for export;
promote reduction of tariff barriers for Ukrainian exporters, including through negotiations with the EU regarding finding a new form of action for canceling EU duties on Ukrainian goods during the full-scale war, as well as concluding free trade agreements and canceling customs tariffs for Ukrainian product exports with other major trading partners of Ukraine;
implement programs to support small and medium-sized enterprises (SME) product exports, particularly targeted programs for regions affected by military actions;
promote adaptation of producers to mandatory technical requirements regarding product and service characteristics for goods of domestic and foreign origin;
conclude an Agreement on Conformity Assessment and Acceptability of Industrial Products (“industrial visa-free regime”);
expand the operation of Black Sea corridors in terms of increasing the number of Ukrainian seaports through which Ukraine will be able to export its products, while expanding the nomenclature of goods that ships will be able to transport;
ensure air defense and anti-missile protection of critical infrastructure facilities and systemically important export enterprises;
ensure, until the end of the war, possibilities for customs clearance directly at the border at crossing points, without submitting a preliminary declaration and with appropriate provision of official control measures directly at crossing points;
simplify requirements for filling out cargo customs declarations by reducing requirements regarding the volume of data necessary for customs clearance of cargo during martial law and the list of documents requested during customs clearance, establishing acceptable terms for submitting such documents after the end of martial law;
implement simplified customs control mechanisms for small and medium companies through processing necessary documents according to the “single window” principle;
establish additional crossing points for export cargo transported westward by road and rail transport;
diversify supply chains, replace maritime transport with rail or road transport;
conduct negotiations with the EU regarding expanding assistance from European partners in establishing transportation and transshipment of agricultural products in EU country ports, as well as regarding establishing terminals, storage facilities, logistics centers for Ukrainian exporter companies on EU territory;
maximally facilitate the operation of the “Chornobyl Terminal” multimodal terminal in the Berehove district of Zakarpattia Oblast to reduce the load on agricultural product warehouses in EU countries neighboring Ukraine;
ensure control over tariff formation for port services, river and maritime cargo transportation to prevent their growth due to monopolistic positioning of such service providers;
implement support programs for mechanical engineering enterprises to create production of critical components for the mechanical engineering industry, including for substituting imports of components manufactured in the Russian Federation;
restore production and sales chains and find new export and import channels for strategically important products;
implement, jointly with partner countries, programs to support small enterprise product exports, particularly targeted programs for regions affected by military actions;
ensure full functioning of the Export Credit Agency (ECA) to stimulate work and support exporters (with possible attraction of foreign financing), extension of ECA functions to insurance of commodity credits;
establish as one of ECA’s tasks the substitution of Russian goods in strategic sectors;
conduct negotiations with other countries regarding implementing lending and guarantee programs for Ukrainian producers involved in foreign company product creation chains;
ensure provision of methodological and legal assistance in creating export consortiums of small and medium enterprises, developing forms of cooperation between such enterprises and large business regarding participation in international cooperation projects, strengthening information support for business internationalization;
ensure support, establishment, and restoration of domestic production of products in industries where Ukraine traditionally held leading positions in the domestic market but was forced to increase import volumes of such products as a result of the war;
apply, if necessary, temporary import restriction measures to stabilize the balance of payments, as provided for by World Trade Organization norms.

The publication is prepared under the project “Strengthening the Analytical Capabilities of the Foreign Policy Decision-Making with the Civil Society” of the Centre for International Security with the support of the Konrad-Adenauer-Stiftung Ukraine (Kyiv).

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